Symantec’s Strategy-Based Transformation

How fresh leadership, serial acquisitions, and a new market made CEO John Thompson’s billion-dollar promise come true.

One of the sacrosanct rules for sustaining shareholder value is to underpromise and overdeliver. Never is this rule truer, nor are the consequences of delivering less than what’s promised worse, than in a corporate turnaround situation. So when the Symantec Corporation, a global software technology company based in Cupertino, Calif., put together a business plan committing to annual revenue growth of 20 percent and delivered something closer to a flat line, Wall Street’s punishment was swift and severe: 38 percent of the company’s value vanished in a day.

That was in June 2001, five quarters after John Thompson, a 28-year IBM veteran, had been recruited to “fix” the Silicon Valley software company. One quarter after becoming Symantec’s chairman, president, and chief executive officer in April 1999, Mr. Thompson announced a transformational strategy to take the company “upmarket,” from its roots in consumer software, to sell so-called enterprise systems, the software installations used by big corporations. He also promised to nearly double revenues, and break the $1 billion ceiling that separates minor software players from majors.

Conceptually, the strategy was a simple one. Symantec dominated the consumer market for personal computer antivirus software, programs that users install to help block bits of rogue code from invading their machines. Many companies already used Symantec’s antivirus product, but as large enterprises embraced the Internet, they would need more robust and more varied software solutions to keep their data safe and secure. Symantec’s strategy was to become the complete provider of security products.

But the real world has a way of intruding on the best-laid strategies of even the most capable leaders. As Symantec’s leadership team turned its attention to acquiring and building capabilities and products for the enterprise customer, the company’s consumer business was blindsided by a series of market disruptions that slashed year-over-year sales by 21 percent in the quarter ended June 30, 2001. “It was the darkest hour of my career because I knew the team had worked really hard,” Mr. Thompson reflected in a November 2002 interview at Symantec’s Cupertino headquarters. The setback “caused us to pause to think about how we were, in fact, going to manage ourselves in a very, very challenging time — a time when we had become confident in our strategy, but we weren’t really sure that the market was going to allow us to execute the strategy given where we were,” he says. “What’s even more relevant is, How do you recover? And how do you rebuild your credibility?”

How Symantec recovered and ultimately did deliver on Mr. Thompson’s billion-dollar promise is a lesson in the realities of corporate transformations. A strategy-based transformation is an opportunity to make a significant change and lasting improvement in the economic value of a company by taking it in a new direction using any number of different approaches — mergers, restructurings, new business models, new markets, or a combination thereof. Symantec’s transformation involved acquiring technology and management capabilities, learning new sales and marketing approaches, and skillfully positioning business leaders to drive change and execute strategy. “John came in and gave the company a greater sense of purpose by doing a small number of moves that seemed obvious after he did them. Some of it’s like Management 101, but his execution has been brilliant,” says Roger McNamee, cofounder and general partner of Integral Capital Partners, which counts Symantec among its 10 largest stock holdings.

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